Trading based purely off Nasdaq L2.

[momotrader]

Originally posted by DATTrader

If I see everything about to go bad, I can hit the biggest bid I can find with a "sell default position size" hot key and close the entire position with one keystroke at which point the open sell orders at the offer prices are automatically cancelled. Obviously, I have these types of keys set for each execution method (SS, Direct ECNS, etc)

By the way the same logic works when opening positions. With decimalization and current market conditions, rarely do I just take an offer or hit a bid with one execution for 1000 shares to open. For longs, I will place a bid or two at and/or below the bid (once I have decided to buy) while perhaps simultaneously taking an offer or two for 100 shares if the stock looks like it is running. If it runs hard right from the getgo, sure I missed some by not taking the whole position at once but that does not happen very often these days. By paring in and being patient with the bids, I can improve my average cost and give my self more room in trade, but I am always just a keystroke away from taking offers if condition warrants. The nice part is that if it does run, I am likely able to get shares at the offer/bid when there is momentum that many others (not trading on one of these platforms) would miss.

PS I was just kidding about the right eye left eye stuff....I can't really do that

I usually jump into positions 500, sometimes 1000 shares at a time... but after reading your post earlier in this thread last week about scaling in and out for 200 shares at a time, I tried trading/scaling in and out 200 shares at a time up to my full position size...

Gotta say, it works out pretty well. Gives you a chance to feel out the little 5 cent twitches in a stock while it's churning and digesting its previous move and setting up for its next move.

Certainly beats jumping in for 1000 at a time, only to realize your buyer is only refreshing so he can drop the second you pay.

 

[momotrader]

Originally posted by Shorteee
I would like to know how many traders in todays environment can actually make a viable living trading solely of the L2 screen. I can see the viability of it when there were fractions but now with the decimals I doubt that one can make a long lasting living trading this nintendo video game methodology. I mean MSFT or CSCO trading solely off the L2 to me would be virtually impossible. The L2 must move like a freaking jack hammer in these stocks and unless your like 15 years old and scalping for 3 pennies all day long-- good luck making a living. Like who gives a rats ass if GSCO is on the bid or ask. Is this really trading or just a way for the house to make oodles of money off off college kids. The commissions although low on a cost per share basis along with the ECN costs must put smiles on the chop shop owners face. The vast majority like 99.95 of the people trading this manner will wake up on day and realize that after a year or two of trading this way all they have been doing is supporting the trading offices' owner and family. Wake and smell the commissions!!! Time to change.

That's exactly why I started this thread. There are *still* lots of traders trading this way. I think many people still think that, eventually, the market will return to the way it was a few years ago. L2 is merely a tool. It depends on the trader what he wants to do with that tool. Trading CSCO or MSFT off L2 is definitely a lot harder than trading something like TMPW. You're right, no one really gives a rat's ass if GSCO is on the bid or ask in CSCO or MSFT. GSCO might cause a 5 cent move in those stocks. That 5 cent move is still *MONEY* for some traders. But in something illiquid, GSCO on the bid or ask could cause a 50c move or more. It's easy money if you watch the stock like a hawk and get in at the right time. You ride it for all you can. If you're wrong, you hit out for 5 or 10 cent risk. I'll take 10 cent risk for 50 cent reward anyday.

 

[momotrader]

Originally posted by Shorteee
So like when the kids who are trading this style in the office and they are in a position do they scream out things like Goldman is on the bid or Merrill is on the offer. Is there a lot of screaming out stuff like that. I saw that on TV a few years ago and I wonder if that type of yelling out still occurs. Hey if you feel you can make a great living with trading solely off the L2 for the next decade or two well good for you.

There are still people screaming out things like that. At least in my firm. And, it's not merely "kids." We have lots of aged 30+ traders here that trade solely off L2, have traded off only L2 through the tech boom, and have traded off L2 before the tech boom.

The truth of the matter is, no matter how good a trader you are, there are times when your stock isn't doing... jack... You can't make money out of nothing, and you can't force a move in your stock. If someone across the room has just been watching GSCO accumulate stock at the bid for the past 30 minutes, and the futures start trending and all of a sudden, GSCO is coming up high bid and spraying the offers, you bet that when that trader calls that move out, everyone that hears him will be able to benefit.

It's really a team environment geared towards open communication. You can benefit off other traders calling things out, just as other traders can benefit from you calling things out. You may not trade *everything* that's called out (although you certainly can try), but a good majority of the things that are called out are good calls by experienced traders. If you were in a room full of traders, would you call out things that you thought weren't *really* good?

Even if you don't trade *anything* anyone ever calls out, it at least alerts you to what else is going on in the market. There have been so many times where other traders have called out big moves, say, an INCA coming up in a first tier stock, only to have me type up 2nd and 3rd tier stocks in the same sector and watch them move as well.

 

[DATTrader]

Since we are on the topic now....I have a story from the bubble days that I think is entertaining. For awhile I was the head instructor for a daytrading class in Denver. At the start of each 4-day class I would do some live trades right at the open. I would purposefully trade super fast stocks and say nothing out load while executing them.

Then after several executions, minutes of superfast Level 2 footage, order cancels, executions etc. (and hopefully after making a hundred bucks or so), I would stop trading look at the dumfounded bewildered looks of the newbies and say "How many people think they can trade this way now? Of course no one would raise their hands.

Then I would say "How many think they will eventually be able to trade that way after the class. Maybe one or two brave hands would go up and I would quickly tell them they were crazy that it would take months etc. Then I would ask if there was anyone who doubted whether they would ever be able to trade this way and several hands would always go up (Level 2 is intimidating the first time for sure).

At that point I would ask for a volunteer for someone to come up to my trading station. I told them to have a seat at my PC-which was still showing the Level 2 of AMZN and asked them if they were ready. No doubt they thought I was going to throw them into a trade. Then I told them while pointing to the keyboard "This is left, this is right, this is thrust, and this is fire. If you get into trouble push this...its hyperspace."

They looked at me like I was crazy....then I quickly toggled over to Asteroids which had been running minimized in the background the whole time. Instantly, huge asteroids are drifting towards there ship. I would yell Move, Fire, do something! (then I would push the thrust a little just to get them drifting with gravity ha ha). Inevitablly they would get blown up within about 5 seconds.

Before the next ship came up I paused and said, "OK you obviously did not get it...this is left, this is right, this is thrust etc"......and started it again. They would maybe last 8 seconds the 2nd time. Finally, after their game ended after only about 15 seconds of collective time, I asked them to go back to their seats and then sat down, started the game, and proceeded to fly around blowing up every asteroid in site, flying in between rocks, around them, right at them like a madman, etc.

I would play for about 4 or 5 minutes without getting blown up and then stop. I concluded with the question, "How many people think that the first time I played Asteroids I played like I just did now versus how Mr. Volunteer there did a few minutes ago.......and then told them that the first time I played I got blown up in 5 seconds just like Mr. Volunteer and estimated how many quarters I probably spent before I got to be as good as I was.

It was a great way to demonstrate the concept that trading is hard, takes lots of practice, focus, etc etc etc. ...... and it was great fun to watch them try to fly around and shoot the rocks with no idea what to do only to die in about 5 seconds. Anyway thought that story would be amusing considering the references to video games and Level 2 trading.

 

[Rod Shaft]

Originally posted by DATTrader


Very interesting concept. You'd have to do a done of shares though and think of all the wiggles you would have to endure-and the resultant heat from the huge positions- waiting for all those shares to fill passively.

Believe me, there are some people who do pretty well employing that strategy at my firm. The good ones average like $1000 a day in bid/offer credits alone. It only really works on low price, low volatility, decent volume stocks like MFNX, not on stocks like SUNW or CSCO. The intro of LSPD bid/offers has made this style of trading even more profitable recently. It also sounds like a very boring style to trade. I haven't tried it myself.

 

[nkhoi]

Originally posted by DATTrader
Instantly, huge asteroids are drifting towards there ship. I would yell Move, Fire, do something! (then I would push the thrust a little just to get them drifting with gravity ha ha). Inevitablly they would get blown up within about 5 seconds.

good game, simple, clean and elegant interface but difficult to master.

 

[momotrader]

Originally posted by DATTrader

It was a great way to demonstrate the concept that trading is hard, takes lots of practice, focus, etc etc etc. ...... and it was great fun to watch them try to fly around and shoot the rocks with no idea what to do only to die in about 5 seconds. Anyway thought that story would be amusing considering the references to video games and Level 2 trading.

LOL. That was a great story DATT.

I come from a long video game background myself and I think that helped me get into my current firm. One of my friends here thinks that people that are great video game players would make great Nasdaq traders because of speed of recognition, speed on the keyboard, and reflexes.

 

[Steve72]

Originally posted by DATTrader
If you would like to see a live demo of one with live executions and order entry examples, etc. check out the Point Direx live demo at:

http://www.pointdirex.com/live/en/ns/html/livedemo.htm

Did anyone actually check this out? If so what did they think about this type of platform versus Tradestation or Realtick or Cyber etc. Thanks for any thoughts as I am seriously thinking about a move from a ticket based RT broker and the discussion between DatTrader, Momotrader, MacDaddy etc has me intrigued about super fast fills and Level 2 based trading/executions.

 

[Rod Shaft]

Originally posted by momotrader


LOL. That was a great story DATT.

I come from a long video game background myself and I think that helped me get into my current firm. One of my friends here thinks that people that are great video game players would make great Nasdaq traders because of speed of recognition, speed on the keyboard, and reflexes.

I agree with that statement. Certainly there is a lot more to being a good Nasdaq trader than just having good video-game skills, but it certainly helps. I was actually required to play a video game during one of the interviews for my current positon as a Nas prop trader.

 

[myoffices]

Originally posted by Steve72


Did anyone actually check this out? If so what did they think about this type of platform versus Tradestation or Realtick or Cyber etc. Thanks for any thoughts as I am seriously thinking about a move from a ticket based RT broker and the discussion between DatTrader, Momotrader, MacDaddy etc has me intrigued about super fast fills and Level 2 based trading/executions.

looking for a real time demo here is another option try the demo at benjamincapital.com they have a video training session online also. Just another suggestion and option to compare with. The executions are simulated in a live environment so you see how it works real time. One thing is if you are trading all day you may not have time so I would suggest testing it on another computer while you trade. Worth taking a look.